I got a little confused while reading over this Econ section. What should we know about this graph?

http://i.imgur.com/wVfKtre.jpg

Thanks for the help

I got a little confused while reading over this Econ section. What should we know about this graph?

http://i.imgur.com/wVfKtre.jpg

Thanks for the help

There are two graphs.

For the graph on the left (Marginal and Average Product Curves):

- Marginal product increases up to a point, then decreases after that point (diminishing marginal product)
- When marginal product is above average product, average product increases
- When marginal product is below average product, average product decreases
- The marginal product curve crosses the average product curve at the maximum average product

For the graph on the right (Cost Curves):

- Marginal cost decreases up to a point, then increases after that point
- When marginal cost is below average variable cost, average variable cost decreases
- When marginal cost is above average variable cost, average variable cost increases
- The marginal cost curve crosses the average variable cost curve at the minimum average variable cost
- (The last three bullet points are also true when “variable” is replaced with “total”)

For the combination of the two graphs:

- The maximum marginal product occurs at the quantity at which the minimum marginal cost occurs

That’s about it.

Here Marginal product is declining after a certain level .The output arising out by adding one more unit is declining continuously . So the graph is coming down.

S2000, this is great. thanks!

I’m glad.

You’re welcome.